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New York vs. Amazon.com: Bad News for Casino Affiliates

by Hillary LaClair, Senior Editor
December 31, 2008

The U.S. may possibly have set a record number of dangerous precedents for the world of internet casino gambling this year – the latest of which, although maybe inadvertent, could criminalize online casino affiliate websites.

Earlier this year, New York State passed legislation forcing Amazon.com to pay taxes, despite Amazon not having a physical presence in the state. A prior Supreme Court ruling has relieved Amazon of having to collect NYS taxes, stating that without the e-tailer’s warehouse or office in the state, it is the customer must declare the purchase on their next tax return.

As a result, Governor David Paterson and his legal team have argued that the affiliate marketers are Amazon’s physical presence. New York now intends to collect $50 million annually from the online retailer. Should the court rule in favor of New York, internet affiliate programs would be treated as extensions of the company’s that they advertise. Perhaps this is good news for New York, but it is potentially devastating for online casino affiliates – especially those based in the United States.

Currently, online casino affiliate programs avoid legal prosecution from the U.S. because they are not gambling websites.Affiliates may advertise for internet casinos, but are not responsible if the websites accept U.S. wagers. A victory for New York would mean either force the affiliate websites to block U.S. users or to shut down altogether.

Joe Brennan Jr. of iMEGA particularly fears for the outcome of the case. “You now have states that are cash-strapped and looking for new ways to bring in revenue,” said Brennan. “New York has been forward-thinking, so to speak, when it comes to approaching the internet.”

It is his belief that New York may soon follow in the footsteps of Kentucky, and pursue legal action against gambling sites. A ruling by the Kentucky Court of Appeals, according to Brennan, may allow New York to attempt a seizure of websites, including Amazon.com. “All you have to do is look at what is going on in Kentucky and see that states may have a leverage option available to them should Kentucky prevail.”

New York is among 11 other U.S. states that have banned gambling from its borders. As such, should the upcoming administration over turn the anti-internet gambling laws, NY may still decide to prevent its residents from participating.

However, Peterson is seeking a major expansion of gambling in the state to allow more multi-state lotteries and increase the hours of operation for Quick Draw games and video-lottery parlors. With the $15.4 billion deficit in the 2009-10 fiscal year, Paterson may turn to the internet to compensate. A gambling expansion could result in $308 million. If he were to consider online casinos, millions would turn into billions.